Prime Minister Imran Khan will also meet IMF Chief Christine Lagarde in Dubai on Sunday to discuss the conditionalities that have held up the accession to the programme.

Information Minister Fawad Chaudhry told Dawn that the premier will meet Ms Lagarde on the sidelines of the World Government Summit in Dubai.

The IMF is asking for an adjustment of around Rs1,600-2,000 billion over three to four years. Besides, it also wants some corrective measures to put Pakistan’s economy on the right track after witnessing the highest-ever current account deficit.

But the stumbling issue in the talks is the pace of adjustments in the current expenditure. The emphasis on current expenditures comes as a result of a focus on what is known as a ‘primary balance’ in the parlance of public finance.

According to the official, there is some space for cut in certain expenditures where Pakistan is in a comfortable position. “This agreement in cut will pave way for accession to the programme,” the official claimed, adding it will be a politically difficult decision.

A cut in the current expenditures still seems to put the government in awkward position by making adjustments in subsidies and other special grants.

The IMF has been demanding that the burden of any expenditure cuts should fall on current expenditures that include debt service, defence and subsidies. Previous governments decreased development expenditures when undertaking the Fund’s adjustment and usually left current expenditures alone (other than subsidies).

But the official said there is certain non-development spending which cannot be discontinued or reduced.

The primary balance of a government’s budget is the difference between revenues and expenditures after removing interest payments. It tests whether the path of debt accumulation of any country is sustainable or not.

If this is in deficit then it means that at least some of the interest payments due in the given year will have to be made through borrowing.

Cutting the primary deficit requires a cut in current expenditures, and usually becomes necessary when reducing debt-to-GDP ratio is a priority.

The two sides continue to exchange views on data and a reform framework to move forward. Discussions are part of regular ongoing interaction between government and IMF and will continue in coming weeks as well, Najeeb said.

“In addition, technical level subject-specific discussions also support the process of overall dialogue,” he further said.

According to the Finance Division official, on the issues of policy measures, the government has already taken several, including increase in interest rate, gas and electricity tariffs along with revenue measures.

The Ministry of Finance recently announced that the Federal Board of Revenue’s (FBR) target will not be revised downward following a revenue shortfall of Rs191bn in the first seven months.

The FBR has been asked to take administrative measures including revival of tax on mobile phone cards to cover up the shortfall in reaching the budgetary target.

The Fund has also asked for further monetary tightening as well as a complete free float of the exchange rate.

We are already towards target in these areas,” the official said, adding the IMF has acknowledged these measures.

According to the official, Finance Minister Asad Umar has already conveyed to the IMF during the recent parleys that only those measures will be taken which are favourable for country’s economic growth.

Although government has secured a breathing space from Saudi Arabian and United Arab Emirates loans, an IMF programme is essential to unlock access to resources from other multilateral lenders like the World Bank and the Asian Development Bank, as well as the global capital markets.

Comments (61) Closed

Is sauddi and uae money over. Chineze commercial banks are ready to give more and more. Why imf

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Gaurav

Feb 10, 2019 08:02am

I thought that Pakistan did not need any loan from IMF, thanks to friendly countries.

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Gordon D. Walker

Feb 10, 2019 08:03am

The bottom line here is Pakistan is in financial distress. Superman Khan trying his best
to secure more loans/investment and lower repayment schedules. If anyone can turn
the good ship Pakistan around it is P M (Superman) Khan!

Gordon D. Walker

Canada

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Gaurav

Feb 10, 2019 08:04am

"But the official said there is certain non-development spending which cannot be discontinued or reduced."

IMF will not fund a unrealistic defense budget.

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Akbar

Feb 10, 2019 08:06am

U turn coming soon.

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Taimur

Feb 10, 2019 08:17am

But the government previously said they don't need it after Saudi package. So the increase in gas and electricity prices were just to make IMF happy? Previous governments were at least sharing with public. The worst thing is that opposition is also in ICU. They don't have a single leader who can raise voice on behalf of people

/

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Ranajyoti

Feb 10, 2019 08:37am

Dividend of Afghanistan peace talk. Grab it and go for long awaited reforms. Lost precious 6 months playing with ego and put country in another 4/5 billion of debt.

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Satya Jeet

Feb 10, 2019 08:39am

Six month ago the solution was IMF.
Now it is 9 billion loans from "friends" plus, but still, IMF.

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khan

Feb 10, 2019 08:42am

This is so confusing. IK and FM keep saying we don't need to go to IMF in the near future. The other thing is, we don't have money now but don't want to cut the expenses now but do it after several years?

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IndoPak

Feb 10, 2019 09:02am

Reading between the lines. IMF is asking to cut down defense budget. It is a line no one in Pakistan can cross !

In pakistan, people have started to put IK and asad umar's photo at traffic junction, instead of a "Uturn" sign.

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Ravi

Feb 10, 2019 09:07am

Oh...Someone in government was talking of no hurry....Why speed up now? Implies situation has gone worse...Accept it...

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sam

Feb 10, 2019 09:16am

They are worried about chinese loan burden on Pakistan that's why hesitate to offer any loan package

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CHELFLS

Feb 10, 2019 09:22am

I was in need of tem million rupees.

I applied for loan.. the procedures were on.

Some of my friends helped me generously. I accumulated a major part amount.

Now again processing for 10 million already applied.

Am I a wise person ?

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No one

Feb 10, 2019 09:23am

I was once a critic of current administration but now feel zardari and Nawaz are both part of problems not solution ailing economy.

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Sweets

Feb 10, 2019 09:33am

This could have been done earlier also without increasing further debt by taking money from Ur friends pockets.

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Najam

Feb 10, 2019 09:34am

So wait! This week this govt thinks an IMF bailout IS needed. Why can't they make up their mind. They are fooling NO ONE. Being unprepared is one thing but what remedy is there for incompetence. This is what many had warned of when the Pakistani Trump was being presented as the massaih but would never reveal his plan for Pak revival. Surprise, surprise, there was NO PLAN

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Mango man

Feb 10, 2019 09:34am

Cut down defense expenditure from the current 60% levels to 25%. Stop funding terrorists through the backdoor. You will be get there

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Srini

Feb 10, 2019 09:51am

According to earlier news reports, IMF funds were not required as Gulf paid the required money.

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Zaman

Feb 10, 2019 09:52am

Good news!!! PM Khan Zindabad

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Fayaz

Feb 10, 2019 09:53am

PM I Khan is the best PM of Pakistan.

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Zoya

Feb 10, 2019 09:55am

Pakistan is super power in getting loans after loans.

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Omer

Feb 10, 2019 09:58am

Good days are ahead for Pakistan, Pakistan Zindabad.

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Qadeer

Feb 10, 2019 10:00am

Win win situation, PM IK is lucky for Pakistan.

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Love Your Country

Feb 10, 2019 10:00am

Option 1. Cut defence spending. Option 2. Cut defence spending.

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A&A

Feb 10, 2019 10:01am

Like their predecessors borrowing money for personal benefits and putting nation on further debts ....Pathetic..!!

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Hwh

Feb 10, 2019 10:08am

How will the systems work? There is a big question on each and every department, whether they are able to take "oxygen" to live. If this primary condition is in doubt what can you expect. Really pathetic condition.

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Syed

Feb 10, 2019 10:19am

Same approach as PMLN and PPP. Imran Khan is breaking every promise he made.. getting electables, not doing local body elections, creation of new provinces and to borrowing loans from IMF.

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VINIT

Feb 10, 2019 10:20am

What about cpec the game changer

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Joesph

Feb 10, 2019 10:26am

China will be the most happy, to get back their money, invested in CPEC.

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AW

Feb 10, 2019 10:29am

Money tightening and increase in interest rates will completely suffocate the already suffocated private investment. It will be the worst decision by the bureaucrats(not economists) running the SBP. There is no inflation so such measures are not needed; unemployment is high and increasing, there is already limited access to cash in the market and people’s purchasing power has been reduced with the increase in prices of consumables; property values are down because of lack of buyers so where is the inflation ?

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AG

Feb 10, 2019 10:33am

Why is this money required after already many nations pledging money. It would have been always better to take loan from one or least number of entities to negotiate better terms, lending rate with them.

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Dr. Hilaria

Feb 10, 2019 10:33am

Hope PMIK does not take any hasty regrettable decision.

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Afia

Feb 10, 2019 10:33am

Stop spending on warfare, we have nuclear deterrence, which is good enough.

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Naveed

Feb 10, 2019 10:36am

Money should be spent wisely on education, water, electricity, and clearing of the Chinese debts. Defense spending needs to be cut, India has no interest in attacking an impoverished nation.

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Zeeshan

Feb 10, 2019 10:39am

Those who are saying PTI said IMF is not needed should see previously they said for time being we don't need to go. We are not hurry to go. They never said they will never go. One statement make our nation so much advocate, wish they were wake from last 10 years when those ruling parting were taking so much loan. People expecting so many things in just few month but never eye on from last 10 year. The nation like this should feel some shame. But what you expect from our nation.

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Jjacky

Feb 10, 2019 10:46am

It means even overseas pakistanis are not sending dollars.

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Sat

Feb 10, 2019 10:47am

This means six billion dollars from Saudi and UAE were not enough. If the situation is so bad now, imagine what would happen when repayments start for CPEC projects.

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Majid

Feb 10, 2019 10:49am

PTI government must be careful about how to spend money so that you do not waste any. Bangladesh have risen from poverty, now has higher 13% GDP than Pakistan.

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Pankaj

Feb 10, 2019 10:53am

It's good to have money and the things that money can buy, but it's good, too, to check up once in a while and make sure that you haven't lost the things that money can't buy (Image, respect, dignity)

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Renegade

Feb 10, 2019 10:54am

Buy USD ASAP, currency will nose dive.

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Prateik

Feb 10, 2019 10:56am

Reduce expenditure, raise electricity price , floating exchange rate, 14% interest rate are the some of the steps which have to taken to secure IMF money.

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Syed

Feb 10, 2019 10:59am

One lie as after another. PTI is incapable of speaking the truth. We spend 60% of our total budget on debt servicing and defense. How can the entire country run on 40% remaining funds. That's why we have to borrow and will continue to borrow till we go bankrupt.

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Dev Mehta

Feb 10, 2019 11:10am

If IMF money comes in as well,it's going to be like golden period with lots of extra billions. If these funds are not used to build export capacity very soon, it would be very tough times when these loans would be due to be paid back - in just a couple of years. And, that would be so easy (and quite likely) to do by spending these billions on defense, on imports or to pay CPEC. So be very careful.

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Zak

Feb 10, 2019 11:25am

@Gaurav, But they funded you despite overspend on defense and being so poor.

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Zak

Feb 10, 2019 11:27am

IK is doing what is right, until he gets us out of the woods.

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JACKJONES

Feb 10, 2019 11:29am

While I appreciate the transparency and disclosure by PTI regarding funding I don't know if the facts have been laid out completely. I would like to know with the current funding pakistan has from UAE and Saudi Arabia and possibly the IMF what is Pakistan projecting to pay for Interest/annually. Not by any means implying that funding was not necessary or pakistan should have looked at other avenues I just want to get an idea on the annual interest expense. In fact, what would be helpful is comparing current funding and interest expense with past funding and interest expense. An analysis with those variables and others would be helpful. Thank you for reading my feedback/comment.

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saber

Feb 10, 2019 11:30am

A man with great nerves , fighting all fronts all alone. I respect him.

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prabhjyot madan

Feb 10, 2019 11:35am

Why does pakistan have to visit Dubai to meet the IMF ? Why did Imran waste tax payers money for the trip expenditure to Dubai. IMF should have come to pakistan. They could have spoken to a lot of other concerned people there too.

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Swiss Neutral

Feb 10, 2019 11:45am

Few months ago PM promised to steer the country out of financial crisis. Getting more and mote loans doesn't help.

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WayToGo

Feb 10, 2019 11:55am

@No one,
Good feeling use it in a better way..

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WayToGo

Feb 10, 2019 11:56am

@Ahmed Mobeen,

The vote is not wasted...

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Kaulm

Feb 10, 2019 12:21pm

Start cutting on defense and increasing investments in education.
Learn from Bangladesh, which is poised to become no.1 in South Asia in next five to ten years in most of the human development indices.

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Shazad

Feb 10, 2019 12:33pm

@fan: Pakistan has ~$100 billion foreign debt and pays interest on that debt, plus amortisation (capital return). So, debt servicing costs around $10 to $15 billion a year (or more). Whatever Pakistan borrows, most goes on payment of interest plus debt amortisation (remember, when Musharraf left, Pakistan external debt was $40 billion and no IMF loan – that was better external debt position than in October 1999 ... that got increased to ~ $100 billion today).

With trade deficit of ~ $2 billion a month, Pakistan needs ~ $3 billion a month for foreign debt to stay constant (same as before). Remittances reduce this requirement to ~ $1.5 billion a month. Thus, govt needs to borrow this amount in dollars every year (or ~$15 billion a year). IMF is better loan than other loans, as it has lower interest rate and opens the door for other cheaper dollar loans.

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Chetan

Feb 10, 2019 12:54pm

Untill n unless you have good sustainable financial planning, no matter how much

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Nand

Feb 10, 2019 01:06pm

@Zeeshan , Out of 71 years, how many years have PPP and PMNL been in power? 10 years ago your Country's debt was US$60 billion. Who created this?

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Shazad

Feb 10, 2019 01:12pm

Previous govts (PPP and PMLN) were borrowing to steal and keep Pakistan afloat. First thing they used to do is go to IMF followed by other lenders. They have also done everything to cripple financial situation of Federal govt, by increasing NFC award % to provinces, so that each party can loot from provincial budgets under their control, make Pakistan weak and defence vulnerable (India spends more than $65 billion a year - in comparison, Pakistan spends less than $10 billion a year). Present government wants to correct the situation.

Arab loans costs 3 % a year with short loan repayment period. Commercial loans cost ~ 8 to 12 % a year with medium to short loan repayment period.

IMF loan costs ~ 1% a year and long loan repayment period, plus access to other low interest loan from WB, ADB, IDB, etc and helps in reducing interest rates on commercial $ loans. IMF program in present situation is required and then govt can spend time to correct the situation.

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Dave

Feb 10, 2019 02:12pm

Good luck .

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Shubham Chakraborty(India)

Feb 10, 2019 07:26pm

Sure these embarrassing and humiliating encounters can be avoided with a little check on your defense spendings.